ANALYSIS OF OCTOBER 26, 2017 SUPREME COURT OPINIONS
(Posted October 26, 2017) Today is opinion day, but I’m on the road for a speaking engagement and won’t be able to post detailed analysis of the two opinions we received this morning from the Supreme Court of Virginia. I’ll post essays on them tomorrow. For now, here are the rulings:
Kalergis v. Commissioner of Highways is an eminent-domain appeal involving a seldom-used procedure after a condemnation: A mandatory buyback when the condemnor decides not to build after all. This opinion explores what happens when the value of the land changes over several intervening years.
La Bella Dona Skin Care v. Belle Femme Enterprises occurs at the intersection — or not — of fraudulent conveyance law and common-law conspiracy. The case also evaluates successor-entity liability.
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Virginia’s eminent-domain statutes permit VDOT to acquire in advance a parcel of land when it contemplates a future road project. Once it acquires the property, it has 20 years to begin the work. If not, the original landowner has the right to reacquire the property for “the original purchase price, without interest.”
Since land generally appreciates in value, this can be a sweet deal for the landowner (or his or her heirs). True, he loses the right to use the property in the interim, absent some sort of possession agreement. But there are no real-estate taxes for the whole period, after which he gets to buy land at a fraction of its current value. How can you go wrong?
In Kalergis, we find out how it can go wrong. The gross parcel was 55 acres; VDOT bought roughly half of that in February 1994 for $1.1 million. Its appraisal valued the land at about $286,000 and the rest for improvements. Because VDOT had no use for the improvements, the landowner offered to buy them. VDOT agreed to let him take away what he could for $30,000. The parties shook on the deal.
The landowner removed several items from the property, but decided not to try to move the buildings. They were eventually demolished.
Let’s fast-forward to 2014. The landowner, well aware of the right of reacquisition, pounced shortly after the 20-year anniversary, demanding to reacquire the now-vacant land for $286K. VDOT wrote back, saying that under its view of the statute, the “original purchase price” was $1.1 million. Alternatively, it offered to accept the current appraised value of the property, $780,000.
The landowner went to court, seeking the benefit of what he perceived to be his statutory bargain. The trial court ruled in favor of VDOT. On appeal, the Supreme Court agrees, viewing the plain meaning of the statute. The landowner was asking the court to interpret “the original purchase price” as meaning “the appraisal value.” But that’s not what the statute says, and when the General Assembly wants to refer to an appraisal, it’s perfectly capable of doing that.
The landowner presumably can now buy the land back for $780K. Careful readers know not to weep for him, since he still winds up with a net gain of around $300K – leaving aside the time value of money, of course.